Impact of Unemployment on Wealth Retention in Black Communities

As we have covered in the past, this economic recovery has not affected all communities equally. The general fact is that the recovery is helping those high earning families, while failing to help the lower-income and minority communities. In fact, the recession caused the wealth gap between whites and minorities to increase by 20%, as reported by the Pew Research Center. This drop caused the largest wealth gap since the government began tracking this information.

The enormity of the wealth gap is in part due to the compound effect unemployment is having on our minority communities. Thanks to the Bureau of Labor Statistics, we can see that this recession has left more minorities unemployed than whites. As of the most recent numbers released for January 2013, the unemployment rate for Blacks was 13.4%, where the white unemployment rate has dropped to 7.0%. Over the last year, the unemployment rate for Blacks is usually about 6% higher than for whites.

Thus, even when Blacks can find the opportunity to succeed and generate wealth, this wealth is usually used to help support their families in ways that are not demanded of white families. A lack of generational wealth significantly stops the ability of individuals to reinvest into their communities and/or start a business. In fact, the U.S. 2012 Economic Census reports that 60.3% of small businesses are funded at least in part by personal savings. Without this personal wealth, Blacks small business owners and community leaders are left without the capital necessary to assist their communities; exactly what is necessary to start creating wealth and end the current unemployment gap.